Definition of Permanent Establishment (BUT) in the OECD Model in Article 5 paragraph (1) :

"A fixed place of business through which the business of an enterprise is wholly or partly carried on"

Classification of Permanent Establishment:

a. Permanent Establishment Assets (Phisically)

• the position of management;
• branches;
• offices;
• factories;
• workshops;
• warehouses;
• sales outlets;
• agriculture;
• plantations;
• mines, etc.

b. Permanent Establishment Activity

• building projects;
• construction;
• installation;
• furnishing of services, etc.

c. Permanent Establishment Agent

d. Permanent Establishment Insurance

Concept of Agents in Civil Law, Common Law System and Tax Treaties

Civil Law :	Party acting on behalf of another party (principal) through direct and indirect presentation.
Common Law :	Does not distinguish between direct and indirect presentation.
Tax Treaties :	Should refer to Article 3 paragraph (2) OECD Model, but in Article 3 paragraph (2) (OECD Model) does not provide definitions of what is meant by an agent.

Article 5 paragraph 5 OECD MODEL:

Notwithstanding the provisions of paragraphs 1 and 2 where a person -- other than an agent of an independent status to whom paragraph 7 applies -- is acting in a Contracting State on behalf of an enterprise of the other Contracting State, that enterprise shall be deemed to have a permanent establishment in the first-mentioned Contracting State in respect of any activities which that person undertakes for the enterprise, if such a person:

a.	has and habitually exercises in that State an authority to conclude contracts in the name of the enterprise, unless the activities of such person are limited to those mentioned in paragraph 4 which, if exercised through a fixed place of business, would not make this fixed place of business a permanent establishment under the provisions of that paragraph;
b.	has no such authority, but habitually maintains in the first-mentioned State a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the enterprise.

PE AGENT

Definition of Agent PE consists of several elements of the following:

1. person
2. has an authority to conclude contracts
3. habitually exercises an authority to conclude contracts
4. other than an agent of an independent status

Ad. 1. Person:

Several indicators to test whether an agent is dependent agent said:
a.	Principal, represented by his agent in the source country has the right to give instructions and make the control to the agent.
b.	Principal bear the cost of activities undertaken in the state agents, regardless of the amount of resources
c.	the business activity conducted by the agency for only one principal for a certain time period.

Ad.2. has an authority to conclude contracts:

A person who is authorized to conduct negotiations concerning the specifications of the contract which will bind the company he represented was enough to say that he runs the country's authority, even if the contract is signed by someone else in the country where the company is domiciled. (Surahmat, Rachmanto, "Avoidance of Double Taxation Agreement An Introduction", in August 2001, page 129).

Ad.3. Habitually exercises an authority to conclude contracts:

The nature of "regular" in signing this contract can be seen from the frequency of signing the contract in accordance with the company's business activities. One of the most decisive factor is whether the activity at the beginning intended for long term or just temporary. (Rahmanto Surahmat, page 130).

Ad.4. Other than an agent of an independent status:

A principal will not be deemed to have a Permanent Establishment in the source country if his business income from state sources are obtained through the person of a broker, commission or other agent-free status (independent agent) all broker, or independent agents komisoner they will be acting for their own businesses or their own principal business activities (normally/ordinary course of business).